Are You Large or Very Large? Changes to Corporation Tax Payment Dates
The very large company quarterly payment regime for Corporation Tax was originally planned to start in 2017 but was then deferred by two years. Two years has now elapsed, and the regime comes into force for companies classed very large, with an accounting period starting on or after 1 April 2019.
This measure accelerates the quarterly Corporation Tax payments regime for UK companies where taxable profits are more than £20m per annum.
There is a sting in the tail. Where companies are related, the £20m threshold is reduced by dividing £20m by the number of related companies. For these purposes, companies are related if one company has an interest in the other that is greater than 50%. For example: A Limited owns 55% of B Limited and 80% of C Limited. In this case there are three related companies in the A Group as A’s interest in B and C is greater than 50%.
By way of a practical example illustrating why the very large company threshold is usually lower than the headline £20m, consider a holding company that has nine wholly owned subsidiaries, one of which, Big Limited, expects UK taxable profits to be £3m for the coming year. The £20m threshold is divided by 10. This means the actual very large threshold for Big Limited is one tenth of £20m; i.e. £2m. Big Limited expects profits of £3m and is in the very large companies payments regime.
Quarterly payments of Corporation Tax for very large companies are accelerated by four months relative to the Large Company Regime. This means a company classified very large with an accounting period commencing 1 April 2019 and ending 31 March 2020 will have a first Corporation Tax payment date of 14 June 2019. All companies classified large will then pay their final quarterly payment for the year ending 31 March 2019 on 14 July 2019.
Mixed groups comprising large and very large companies will, when looking across the group as a whole, make eight payments of tax a year, four quarterly payments for the Large Companies and four for the very large companies. We have been advised by HMRC this is the case regardless of whether the group is in a Group Payment Arrangement or not.